BackDBS Bank gets nod to operate as wholly-owned subsidiary in India
DBS Bank, the first foreign bank to seek RBI approval, had applied for the licence way back in 2014 to operate as a wholly-owned subsidiary
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Mumbai: DBS Bank Ltd has received approval from the Reserve Bank of India (RBI) to offer banking services in India through the wholly owned subsidiary (WOS) model, the Singapore-based lender announced on Monday.
The central bank’s approval will make DBS the second foreign bank to operate through the WOS model in India after State Bank of Mauritius.
RBI wants foreign lenders in India to function through wholly-owned subsidiaries in order to insulate banking operations from any crisis the parent may be facing and also to ensure better regulation.
In November 2013, the central bank released a framework for the setting up of wholly-owned subsidiaries by foreign banks in India.
Even while the banking regulator has not made the WOS model mandatory, it expects foreign banks to fall in line.
RBI has said that foreign banks operating through a WOS will be treated at par with local banks and will be allowed to acquire private lenders in India. The model will also allow the banks to open branches more freely, subject to some regulations.
Foreign banks that are keen to do business in the country through a WOS believe in India’s growth story, said Udit Kariwala, senior analyst, financial institutions at India Ratings and Research.
“Seeking approval from the RBI for operating through WOS indicates that the bank is keen on expanding in India. This opens doors to enabling a larger branch network and a more focused strategy," he added.
Piyush Gupta, DBS Group chief executive, said the bank will convert to a wholly-owned subsidiary model within a year. “The WOS model will allow us to expand our distribution reach. We will focus on small and medium enterprises, supply chain and transaction banking," Gupta said. He also said DBS Bank will soon enter the consumer finance space.
As on 31 March 2017, DBS Bank’s net profit in India stood at Rs13 crore. Its loan book grew 24% to Rs21,838 in fiscal 2017. The bank currently has 12 branches in India.
On whether the wholly-owned subsidiary model would limit the bank’s ability to leverage the parent’s balance sheet, Gupta said, “DBS operates through subsidiaries in all its major markets including China. It is something we are already comfortable with".
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